646,000 North Carolinians would see their wages rise under new Fair Minimum Wage Act

RALEIGH (August 14, 2012) – Raising the federal minimum wage would help workers and families who are still reeling from the effects of the Great Recession, according to a new report released this morning, as well as provide a much-needed boost for the economy and create thousands of jobs across both the U.S. and North Carolina.

The Fair Minimum Wage Act, introduced by Sen. Tom Harkin (D-IA) and Rep. George Miller (D-CA) on July 26, 2012, would include an increase in the federal minimum wage from the current $7.25 to $9.80 by 2014 through three incremental increases of $0.85. The proposed increase would raise the wages of approximately 28 million workers, according to a new report from the Economic Policy Institute, who would have access to new earnings that they could spend immediately – therefore generating a positive impact on both the GDP and employment growth.

The act would increase the tipped minimum wage in $0.85 increments until it reaches 70 percent of the regular minimum wage. Workers would receive nearly $40 billion in additional wages during the phase-in period, during which the GDP would increase by roughly $25 billion, the report said, resulting in the creation of approximately 100,000 new jobs.

“With the national unemployment rate not budging below 8.0 percent, now is the perfect time to raise the minimum wage,” said Douglas Hall, a researcher with EP. “Not only will it generate billions of new dollars for the economy while adding new jobs when we sorely need them, it will begin to address the wage stagnation working families have faced during the last four decades, while putting more money in their hands when they need it most.”

Here in North Carolina, approximately 646,000 workers would see their wages rise and an additional 269,000 workers would be indirectly affected as employer pay scales are adjusted upward to reflect the new minimum wage, according to the report. Contrary to the perception that most minimum wage workers are younger workers, 92 percent of those who would be affected by a minimum wage increase in our state are at least 20 years old. Similarly, data on educational attainment of those who would be affected by an increase shows that only 20 percent of those affected have less than a high school degree, while 44.6 percent have some college education, an associate degree or more.

Raising the federal minimum wage could make all the difference for North Carolinians struggling to stay out of poverty. The state minimum wage is currently matched with the federal minimum of $7.25 per hour, with North Carolina’s full-time minimum-wage workers earning a total of only $290.00 per week – approximately $15,080.00 per year before taxes. The federal poverty threshold for 2011, on the other hand, is $18,106 for a family of three. According to the Budget and Tax Center’s Living Income Standard, the typical North Carolina family of three actually needs $41,920 to afford basic expenses.

As the report also shows, a minimum-wage increase would provide a much-needed boost to our economy. The potential GDP impact for North Carolina, which assumes that most of the increased earnings would be spent in-state, is estimated to be close to $848 million with the possibility of an additional 3,400 net new jobs created in the state.

Sabine Schoenbach, a policy analyst with the North Carolina Justice Center’s Workers’ Rights Project, pointed out that 18 states plus Washington DC currently have minimum wages above the federal level, and more are starting to take action to correct their low wages.

“Here in North Carolina, however, not much is happening,” Schoenbach said. “With the effects of the Great Recession still reverberating around the state, a federal minimum wage increase is a key strategy for helping North Carolina families make ends meet and for a sustainable economic recovery.”